Canada's first A.I.-driven exchange traded fund

There are very strong A.I. and technological advances here in Ontario and our Korean partner was able to take advantage of this.

Ontario's Horizons ETFs advances its ongoing quest for innovation

There's a complex calculus to building an investment portfolio – a system of reasoning that takes into account a host of factors that can affect the performance of stocks, bonds and other financial assets.

So what happens when emotions and personal bias are taken out of the mix?

Thanks to a first-in-Canada innovation by Toronto, Ontario-based Horizons ETFs Management (Canada) Inc., investors can now put their money into exchange traded funds – or ETFs for short – that take prejudices out of the equity-selection process. Powered by artificial intelligence (A.I.), the Horizons Active A.I. Global Equity ETF, known by its ticker "MIND", gives investors access to a global equity portfolio of North American-listed ETFs chosen entirely by a continuously learning algorithm that picks up patterns from data analysis.

"When you remove investment bias and emotion, you can make rational and, at the end of the day, better decisions," says Steve Hawkins, president and co-CEO of Horizons ETFs. "Our A.I. system can do that."

Within seconds, the algorithm analyzes the vast number of data points available in the world's capital markets to allocate and rebalance its global equity index exposure, explains Hawkins. The A.I. system, which took close to a year to build and test, is designed to keep enhancing the fund's performance as it learns from the constant stream of new data.

An innovator known for many industry 'firsts'

The MIND fund is yet another innovation from a company that's known for many industry firsts. Since its founding in Toronto in 2005, Horizons ETFs has introduced many market disruptors, including the world's first actively managed ETFs, the first leveraged commodity ETF and, earlier this year, the world's first marijuana ETF.

"We have just launched the first robotics and automation ETF in Canada," says Hawkins. "We've continued to come out with new and innovative products every year."

It's not surprising that Horizons ETFs has grown exponentially over the last 12 years. From its first two ETFs in 2007, the company's offerings have grown to over 80 different products traded on the Toronto Stock Exchange. Today, Horizons ETFs has more than $9 billion in assets under management.

"We are the fourth-largest ETF provider in Canada," says Hawkins. "And this sector has seen huge growth – when started, our company was one of three ETF companies in Canada and now there are about 30 ETF companies with more than 600 ETF products in Canada."

The Ontario advantage: Access to a world-leading financial centre in the world

As an Ontario company based in the country's financial services capital and one of the top 10 international financial centres, Horizons has access to a wide range of resources, says Hawkins. Toronto is home to Canada's four largest banks and more than 80 per cent of the foreign banks in the country.

Of the 10 largest Canadian asset managers, eight are located in Toronto, which also happens to be the birthplace of the modern exchange traded fund.

"Our location is extremely important for our business," says Hawkins.

"To be able to bring products quickly to market, we have to work closely with the banks. We also have very strong working relationships with other asset management companies."

A progressive regulatory environment that breeds innovation

Ontario's progressive securities industry regulator, the Ontario Securities Commission, has also been critical to the success of Horizons ETFs, says Hawkins.

"A lot of our innovations really stem from the progressiveness of the regulators in Ontario – we work with them very closely all the time and they help us from a product structuring perspective,"

says Hawkins. "Dealing with a regulator that's much more open, forward-looking and generally very friendly to work with has allowed us the flexibility to lead the market with new products and product structures."

A rich pool of talented workers

Finding talented workers in Toronto is "almost too easy,"

says Hawkins, who points out that a single job posting from Horizons ETFs can typically draw more than 100 applications within a week. The company's skill requirements fall within a wide spectrum that includes computer analysis and programming, accounting, sales and marketing.

"There's a lot of talent in Ontario,"

says Hawkins, whose company employs about 60 workers in Ontario, plus two in Bogota, Colombia. "In fact, our computer and technical staff are all Ontario-educated."

A growing hub of A.I. expertise

Ontario's emergence as a leading hub for AI has also been an advantage for Horizons ETF, says Hawkins. The Korean developer that built the A.I. system behind the MIND fund collaborated throughout the product's development phase with a number of Ontario and Canadian-based A.I. companies, he notes.

"There are very strong A.I. and technological advances here in Ontario, and our Korean partner was able to take advantage of this through its collaborations with A.I. companies in Ontario," says Hawkins.

"Diversification is one of the key parameters for a successful investment portfolio. Our A.I. system will generally allocate outside of Canada, so this will allow Canadians to get more global equity exposure in their portfolio. We believe that ultimately the A.I. system will be a better portfolio manager and will be able to significantly beat the overall equity market performance of the world."

Horizons ETFs is the Exclusive ETF Sponsor of the Toronto Raptors for the 2017-2018 Season.